Tax and Customs Regulations: Small Brief

Taxation in Bangladesh can be divided into three broad categories: income tax, value added tax (VAT) and customs duties. Income tax is regulated by the Income Tax Ordinance 1984 and the Income Tax Rules 1984. VAT is governed by the VAT Act 1991, and customs duties are governed by the Customs Act 1969.

Income tax

For companies other than financial institutions, the tax year in Bangladesh runs from July to June. A private company limited by shares pays corporate tax at 35%. A branch office is given the same status as a private limited company and is taxed at the same rate. A liaison office cannot undertake commercial activity, so its tax rate is nil, although it must still submit a tax return.

For individuals, a non-resident is taxed at a maximum rate of 30%, while residents pay tax on a lower, slab-based progressive scale. Non-residents are those who spend fewer than 182 days in an income year, though there are special provisions for a person who spends at least 90 days in Bangladesh. On application, each person or company is allocated a Taxpayer Identification Number, which assigns them to a specific taxation authority. A company must obtain permission from the competent authority before employing a foreign worker. Entities are also responsible for deducting tax at source before making payments.

Value added tax

VAT applies at several rates, including truncated rates. The general rate is around 15% and is usually payable on a monthly basis. Entities also have a responsibility to deduct VAT at source when making payments in certain sectors. However, VAT — like other taxes — is exempted in a number of sectors for companies that enter into a Production Sharing Contract (PSC) with the government.

Customs duties

Customs duties in Bangladesh vary from product to product and are determined by the Finance Act promulgated each year. The largest customs station in the country is Chittagong, which operates on an automated processing system known as ASYCUDA++.